Another day, another surge in U.S. bonds yields, and another sell-off on global markets. On top of that, Asian markets wake up on Friday to a raft of key economic indicators that could confirm the extent of China’s slowdown.
The August readings for house prices, urban investment, industrial production, retail sales and unemployment will paint a pretty clear picture of where the Chinese economy is right now. And it is not a pretty picture.
Any hopes for a rebound in the second half of the year have been dashed by renewed COVID-19 lockdowns and the deepening property sector slump. Trade growth has also slowed, while on Thursday the offshore yuan fell to a fresh two-year low through the 7.00/dollar barrier.
As part of a sweeping global downgrade, economists at Barclays (LON:BARC) cut their 2022 Chinese GDP growth forecast to 2.6% from 3.1% – “its lowest annual growth outcome in many decades” – and cut next year’s outlook to 4.5% from 5.3%.
Some economists are even expecting sub-2% growth this year.
Following the offshore yuan’s fall below 7.00/$, markets will be alert to possible PBOC action to prevent the fall from snowballing. The dollar has jumped 10% in the last five months, and 5% in the last two – huge moves for the tightly managed yuan.
But given the seemingly unstoppable rise in the two-year U.S. bond yield it will be difficult to tame the dollar, something the BOJ will also be acutely aware of as the yen falls back towards 145.00/$.
South Korean unemployment data and RBA governor Phillip Lowe’s (NYSE:LOW) parliamentary testimony could also give their respective currencies direction on Friday.
Key developments that should provide more direction to markets on Friday:
South Korea unemployment (August)
RBA governor Philip Lowe speaks
Sony (NYSE:SONY) earnings (Q2)
Euro zone inflation (August)
U MIch inflation expectations (September)
Source: Economy - investing.com
